Maersk (MAERSK; Baa1/BBB+; S) 1Q24 Results

Weakening industry fundamentals beginning to show on margins. Shouldn't be a surprise & co has plenty of headroom to whether a lull - Moody' saw negative EBIT to at least 1H25 when it gave its upgrade to Baa1 Stable in Feb. Its ratings in next couple of years are likely to be entirely supported by a strong cash position - not something we like; headlines today that the CEO still considering DB Schenker - the logistics unit of high-grade (& state supported) issuer Deutsche Bahn that is up for sale at estimated €10-20b - is an example of why. The curve screens rich - not a view we would trade though as always has bar blow-ups like Baltimore bridge collapse - trading inside of all airlines & not far from staple retailers like McDonald (on 31/32s)

• Q1 Results were in line on headline at $12.4b. EBITDA was $1.59b at a 13% margin - EBITDA & margin are very weak - it says its on the low 2023 freight rates driving rates down 18%yoy. Costs it says on continued red-sea disruptions but we see nearly a equal drag from other, SG&A and FX impacts.
• Margins are always volatile for Maersk/not seasonal. Note increasing capacity in the industry is a well flagged risk in - it sees capacity growing 2-3%/qtr - a headwind for rates
• Operating income was $177m (1.4% margin), FCF at -$155m.* On BS: distributed $1b in dividends & another $400m in buybacks - which it says was helped from Svitzer demerger {SVITZR DC Equity} - now a standalone towage and marine services co. Gross debt at $16b (issued in €) with a net cash position at $3.1b - down from $4.7b last year.
• FY Guidance raised; to volume growth at upper end of 2.5-4.5% range, Capex at $8-9b, EBITDA at $4-6b, EBIT neg $2b to flat & FCF of at least -$2b.